I was inspired to write this article as a result of a friend encouraging me to share the top areas we focus on in our successful and rapidly expanding café group. Over the years we’ve put together a magical core team of like-minded people, as well as inspiring café owners who continuously contribute and develop the systems and processes that are the corner stone of our success.
Some of the knowledge I’m sharing has been gathered from mentors, some from the school of hard knocks, some through trial and error and some from just getting it wrong sometimes and working out how to do it better next time.
These strategies and concepts have helped us build, run and sell more than 60 cafes over the last 17 years. They have helped us build a successful franchise model that supports entrepreneur to realise their dream of café ownership.
The trick is not to do everything at once. This will just frustrate you and take longer. Choose one or two ideas you believe will have the biggest impact and focus on them until you have them down pat. Only then move to the next. I hope you find them useful and look forward to hearing how they work for you.
So, in no particular order, here you go:
1. Start With The End in Mind:
What does your business look when you reach the Promised Land? … Are you looking for one local café that can be an expression of your personality? … Or do you want to own a group? … Do you want to make coffee and serve customers, or do you want to create business and employment opportunities? … There’s no right or wrong answer, just what calls your spirit and how you see yourself in the world. Once you’ve got a clear idea of where you want to land, it’s easier for you to make decisions in line with what you want. The question to ask yourself is “Will this take me closer to what I want?” … If so – do it. If not, do something else which is in line with your end game.
2. “People Eat with Their Eyes”
A.K.A: Stay Well Stocked – think about how you feel when you’re looking at a well-displayed, well-stocked, deliciously tempting, mouth-watering display. The answer is simple: HUNGRY… That’s the feeling you want to create. When Noam, my partner, walks into any of our cafes, one of the first things he asks the manager is: “What is the (visual) story your display tells today?” The question really quickly allows the owner or manager to experience the display not from a practical but from the customers’ point of view.
3. Test and Measure
I cannot stress enough the importance of testing and measuring. If you can’t measure the activity you’re conducting how will you know if things are improving or if you are doing well? It like throwing darts at a blank target. Once you’ve decided on the activity you want to run – whether it’s a marketing or operational improvement – the activity must be measurable in some way. This will help you determine its effectiveness and overall improvement or not to the business and help you determine if to continue it or not. You must be able to answer questions like: How many people responded to your marketing? How much did it cost? How much revenue was generated as a result? Did the promotion make money or not? Is it worth doing again? Similar questions need to be asked around operational changes from staffing to shop design. We provide our cafes with a monitoring tool but you could create one by using a simple spread sheet. At the end of the day you need to be able to measure the actions so you can effectively continue or adjust your next decision.
4. Find and Hire Happy People.
This might come as shock for some but I hope not for most. In this industry you must create an uplifting, happy feeling in your venue. You customer must feel better about themselves when they leave, than when they came in. NO ONE is interested in your problems! People come to your café for lots of reasons. NONE of them are to hear about your issues, they’re here to escape theirs. The best way to do this is to have happy staff serving your customers. Hire for Attitude first, skill second. I have always found it is easier to train staff how to make a great coffee than to be happy and positive. I find that most of the time you either are or you are not. Customers can feel when staff fake it – don’t even try! One of my partners, Tal’s number one daily goal is to: “Put 100 smiles on people’s face” and it works like magic.
5. Point Of Sale System (POS)
These days there is no excuse not to own one. The ability to control stock, rosters, marketing, winning and losing products… the advantages far out way the cost of a well designed and USED POS. I highlight “used” because I see a lot of cafe owners underutilising their system and unaware of the power they have at their fingertips. Most POS systems are able to help you look deep into what is working for your business and what is not (as well as test and measure). While we invested heavily in developing our’s so it is tailored specifically for our operations, most basic POS should be able to pull up reports that highlight the top 5 best and bottom sellers. This helps you cull the losers and focus on the winners. Other reports can help you see the trends of peaks and troughs on a daily, weekly and monthly basis. This can greatly help with rostering and stock control. By highlighting when you need more stock and more staff and vice-versa. The better POS systems out there can help you track marketing activities, communicate with your customers, track their purchasing habits, reward them for their loyalty and much more. Again the trick is to start small and build on the information you gather to give you more insight into what works.
6. Increase prices regularly.
Increasing prices can sometimes can be daunting, I get it. In the past I was also afraid to increase prices for fear of losing customers, until I found out that that with our margins (in this industry) I needed to lose close to 25% of my customers to be worse off with an increase of 10% on the prices. In the past I was not sure about how much, but I was sure I would not lose that many customers. I also figured out that even if I did lose 15% of my customers I would still be ahead and the bonus was that the team didn’t work as hard to produce more profits or I could cut down labour hours. Either way I was ahead. The other thing we did, was not increase all the prices at the same time, but over different product groups at different times. We found that the only people who noticed or cared were the bargain hunters. We discovered that the bargain hunter usually buys the least and costs the most, so even if I lost them that would be another blessing. Increasing prices helped me determine who are my best customers and who I should be focusing on.
7. Improve your margins.
Margin is the difference between your Cost of Goods and your Price. The higher the margin, the more gross profit you have to cover your bills (rent, wages, marketing) The more high margin, winning products you have in your range, the less products you need to create a profitable business. Fewer products means it’s easier to manage operations and staff. Here are several ways to improve your margin:
- Start with knowing what they are (Cost divided by price in percentage).
- Increase prices.
- Decrease cost – use fewer products or negotiate with suppliers and adjust recipes seasonally
- Reduce waste
- Limit discounting
8. Find and keep excellent suppliers
finding the right supplier, be it by joining a café group like ours or investing the time yourself, is extremely important as suppliers become an integral part of your business. Remember, you are their customer and they have a vested business interest in helping you succeed. Make sure you pay your supplier on time and communicate your needs clearly. Be loyal – if you do, they will take care of you by providing you better prices, they will make you a priority and will be more likely to be flexible on payment terms. Most important of all, they’re more likely to promote your business to their customers and friends. Remember, the more you succeed, the more they succeed as a result. Having a great relationship with your suppliers improves both businesses and makes business more fun.
9. Know your numbers
Numbers is one on the main ways for you to know if you are on track or not. By knowing the industry standards (which can be found through the tax office online) and your own internal numbers, you can easily see if you are on track or not. Like testing and measuring, it gives you a yardstick and a goal to aim for. These are some of the more important numbers to look out for, besides the obvious turnover:
- Food Cost
- Wage cost
- Number of customers you serve per day.
- Average dollar sale per customer
Comfort and functional shop design. In simple terms this is how the shop and equipment are laid out to provide the most efficient and effective space to work and serve customers. It can come down to moving a piece of equipment 2-3m to the left or right to save 4-5 steps per movement which could result in faster services and/or wage reduction. This translates to better customer service and cost saving. Most of this work is done before you open the shop, so make sure an experienced operator is involved in this process.
New methods and equipment are always coming on to the market that can help save space, improve functionally and speed. The main point to keep in mind will be analyse the cost of the change or purchase with potentials benefits or how long it will take to get a return on investment.
11. Analysing your competition
- What are they doing well?
- What can I do better?
- Why would people want to come to my café instead?
- Possible price point
- Possible product mix
We have found over the years that focusing on providing a fantastic environment, building strong relationships with our customers and providing value for money products and services always yielded positive results. I like to know what my competitor is doing but I do not obsess about it. I realised very early on that I couldn’t change what they are doing, only what I did. I never participate in a price war as I never know who has the deeper pockets. Instead, I focus on adding value or introducing new and exciting products.
Probably one of the most important aspects and the corner stone of any business. You could be the best lawyer, mechanic or florist in the world, but if no one knows about you, your business will still flounder.
I find it amazing that some people think that just by opening the shop people will flock in and discover how wonderful they are – This is major mistake. Just because you build it, doesn’t mean they will come! For every café we open we have a sequenced launched. From 6-8 weeks out of the opening day, until 3-4 weeks after the launch, there is a methodical marketing strategy that builds the excitement and the customer base. Once we have settled in to the daily operation we have a 12 month marketing strategy.
- Prominent signage
- Social media
- Letter box drops
- Posters in the community and the shopping centre
- Join ventures
- Data base – direct marketing
- Daily, weekly specials
- Special events during the year
- Loyalty cards.
These are just a few we use to encourage people to come back and to give them a reason to come and try us out. Once they come, it is up to me and the team to impress them and give them more reasons to come back.
Wow, it been amazing to take time and write some of what we have been doing in the last 17 years and see how much we have learnt. It’s been interesting to look back as see the road we travelled and the people that have joined our journey. I see there is a lot more I can add and expand on. Things like: Lease negotiations (27 things to look out for), preparing and selling your café for maximum profits. Finding and training great staff… so much more. But I guess this will be up to you – if you found this at all useful or if you would like me to expand on other topics or go deeper on some of the above just let me know.
My belief is that there is enough for everyone and you can never go short by sharing, so I am happy to do so. I look forward to connecting with you and hearing your café story and dreams.